Ethereum Classic, Consensys, Bitmain, and More: Crypto Startups Are Feeling the Price Dip
Ethereum Classic grabbed the headlines recently after it suffered a 51 percent attack on its blockchain. The crypto’s development team was quick to reassure its users through social media. However, some exchanges such as Gate.io have come forward to confirm that they have lost funds to the hack. Engineers from Coinbase also compiled a report that confirmed the attack. The report revealed that the double spending and blockchain reorganizations had led to the loss of at least $1.1 million.
Incidentally, Ethereum Classic’s development team threw in the towel a month ago citing lack of funds. The team announced on December 3 that funding efforts had been unsuccessful and that it was unable to fund its activities. It further attributed the funding struggles to a cash crunch in the company and the 2018 market crash.
Unfortunately ETCDEV cannot continue to work in the current situation and has to announce shutdown of our current activities pic.twitter.com/N6xWnpBNJJ
— ETCDEV (@etcdev) December 3, 2018
ETC’s development team hasn’t been the only team that has found it extremely difficult to operate under the current conditions. With Bitcoin down by over 80 percent from its 2017 high, funding has been a major challenge.
Nobody Saw It Coming
In 2017, the crypto market was on its best run yet. ICOs were raising billions of dollars, investors were buying cryptos without questioning their values, and crypto prices were shooting up with each passing day. Nothing could go wrong. Except something did.
Since January 2018, crypto prices have been on a downward spiral. Granted, there have been some positive price rallies in between. However, they have been short-lived and nowhere close to the previous year.
Most crypto startups raised money through ICOs. At the time, the method received praise for its ability to cut out the middlemen and give every investor the chance to invest in promising startups. The ICOs raised funds through Bitcoin and Ethereum, predominantly. With both currencies down 80 percent, most startups have seen their funds reduced drastically. This has led some to shut down, while others have had to lay off some of their staff.
Even the Giants Weren’t Spared
The crisis has affected every other crypto startup, from the giants to the smaller firms. One giant that has felt the dip is Bitmain. The Beijing-based mining chips manufacturer was one of the most profitable companies in the industry in 2017. Bitmain controls more than 75 percent of the ASIC market. It also owns two of the largest Bitcoin mining pools, Antpool and BTC.com.
Bitmain recently succumbed to the price dip and the reduced liquidity, laying off a huge number of its staff. The company owns a huge stash of cryptos, key among them Bitcoin and its fork, Bitcoin Cash. While Bitcoin is down 80 percent, Bitcoin Cash has fared worse and is down 96 percent.
In December last year, Bitmain shut down its research and development center in Israel. The center had 23 staff members, all of whom the firm laid off indefinitely. Reports have also emerged that the company will lay off close to half of its current staff. The layoffs are being attributed to lack of funds due to the dipping prices of cryptos. Most of the staff to be laid off are from the non-core business divisions such as artificial intelligence.
ConsenSys has also fallen victim to the bear market, laying off some of its staff in a bid to restructure operations. The New York-based company was founded by Ethereum co-founder Joseph Lubin. It incubates Ethereum startups. In December last year, the company confirmed reports that it would lay off 13 percent of its workforce. Three weeks later, it emerged that the layoffs could affect as much as 60 percent of the workforce.
The Smaller Firms Are Caving Even Faster
While the large firms can afford to ride out the bear market, the smaller firms aren’t as fortunate. Many smaller crypto startups have caved, laying off a majority of their staff or shutting down completely.
One of these is Steemit, the decentralized social media app that focused on fair compensation for content creators. Steemit laid off 70 percent of its workforce in December last year. Steemit’s founder, Ned Scott explained via a blog post:
Given the weakness of the cryptocurrency market, the fiat returns on our automated selling of STEEM diminishing, and the growing costs of running full Steem nodes, we have been forced to layoff close to 70% of the team. The remainder of the team is staying on to focus primarily on reducing the costs of the infrastructure running steemit.com
The bloodbath hasn’t spared the crypto exchanges either. One of the victims is Shapeshift, the crypto exchange founded and led by Erik Voorhes. The exchange laid off 37 employees just a few days ago, reducing its team by over 30 percent. In a blog post, Voorhes cited the crypto winter as the reason behind the layoffs. He also thanked the employees who have catapulted the exchange to its current level.
Is This How the Story Ends?
There have been many other companies that have laid off staff, but most of these have been under the radar. They include Kraken, Coinfloor, Huobi, and Spankchain.
While these are some of the more notable names that the crypto winter has affected, there have been hundreds more. According to a report by Sky News, the UK has seen a staggering 340 blockchain and crypto companies close their doors.
So, is this how the story ends? Hopefully not. The crypto industry has come a long way in the past decade. From a niche concept a few years ago, cryptos have grown to hundreds of billions of dollars. More importantly, they have impacted very many sectors of the economy.
As the new year kicks in, we can only hope that the affected companies can bounce back to their former glory.
On June 21, the FATF, a global banking organization will release updated guidelines...
On June 21, the FATF, a global banking organization will release updated guidelines regarding crypto, and it could potentially wipe out some companies.
ABOUT THE AUTHOR
ABOUT THE AUTHOR
Steve is a blockchain and tech enthusiast with a writing career that spans six years. He is fascinated by the revolutionary power that cryptos give to their users and believes that they will shape the future of money